MOSCOW Russia geared up to ship as much as much as 20 million tonnes of new-harvest grain to tight markets after lifting its export ban at the weekend, but buyers said the Black Sea powerhouse had to prove its reliability anew.
The head of Russia's Grains Union lobby said Russia could export 20 million tonnes of grain from this year's crop if the harvest reaches 85-90 million tonnes, in line with official forecasts.
"The export potential is 15 million. Maybe we can even export 20 million if the harvest reaches 85-90 million tonnes," Arkady Zlochevsky said.
Russia, once the world's third largest wheat exporter, saw 2010's catastrophic drought slash its crop by a third which prompted the government, fearful of shortages, to ban deliveries of grain to foreign markets from August last year.
The impending July 1 end to Russia's ban on grain exports, officially announced on Saturday, sent Paris November wheat futures tumbling 4.5 percent to 238.50 euros ($340.7) per tonne.
Trade is due to resume on Tuesday at the Chicago Board of Trade following Monday's Memorial Day holiday.
But the gap between Russian prices and world benchmarks remains wide, even though domestic wheat prices have been pushing higher as exporters positioned to resume shipments.
"In the North Caucasus exporters remain active buyers of wheat at domestic and port elevators, which is supporting a gradual increase in prices in the region by 50-100 roubles ($1.78-$3.56) over the week," SovEcon think tank said in a market comment.
SovEcon quoted third-grade milling wheat offered ex-works at 5,725 roubles ($204) per tonne on average in European Russia.
As it prepares to resume from July 1, its exporters are hoping to return its clients' faith with offers of cheap grain.
"Russia will return once again but it will be dealt with cautiously," Nomani Nomani, the vice chairman of Egypt's General Authority for Supply Commodities, told Reuters in an interview.
"We do not want to fall into the same problem we fell into last year," he said.
Egypt was forced to scramble to replace more than 500,000 tonnes of Russian wheat purchases when Moscow imposed the ban.
WATCH AND WAIT
The government could yet clamp down if domestic supplies start looking short or inflation accelerates in a crucial political year when parliamentary elections are due in December and a presidential poll in March.
"If issues of price increases arise, we will use means of customs and tariff regulation," Deputy Prime Minister Viktor Zubkov, who recommended Putin end the ban, told the prime minister on Saturday.
Russia's farm lobbies, traders and analysts had proposed a more conservative three month export window from July 1 to relieve a stock buildup in the south and help domestic prices off of lows to encourage investment in next year's crop.
Many senior industry figures had also expected a system of quotas or protective export tariffs to be imposed in order to control the outflows.
"They will track the pace of export growth, the international market dynamics, the pace of retail price growth, and eventually they may still impose export duties," Andrei Sizov, managing director of the SovEcon think tank, said.
Russia's central bank, which left key lending rates on hold on Monday in its struggle to restrain inflation without killing off growth, said the decision over the weekend to lift the grain export ban posed the single biggest threat to prices.
Russian inflation is running at an annual 9.7 percent.
"This is the only significant risk factor," central bank chief Sergei Ignatyev said after the bank raised its key deposit rate, referring to the decision to lift the ban.
With the political odds stacked against unfettered exports, traders said they did not fully believe that free shipments could continue for long.
"Will Russia really open its gates in a lasting way and without any export restrictions? I want a clear and precise confirmation," a European grain trader said.
(Reporting by Melissa Akin, Alfred Kueppers and Andrei Ostroukh in Moscow, Gus Trompiz in Paris, Michael Hogan in Frankfurt, and Shaimaa Fayed and Dina Zayet in Cairo; writing by Melissa Akin in Moscow; editing by Keiron Henderson)